Nest Pension to Vanguard SIPP

potatobrains

Hi All,

I've got a Nest Higher Risk fund pension of nearly £35k, and I'm 39years old. The Nest pension was from my previous employer so it now only receives contributions from myself. I'm considering transferring it into a Vanguard SIPP to use one of their retirement funds (2050 possibly 0.24% OCF). I'm already with Vanguard for my S&S ISA and quite like their platform. My (probably dodgy) calculations say the overall Vanguard fees are cheaper (0.15% platform + fund 0.24% + txn fee ~0.07% = 0.46%), than the overall Nest ones (1.8% txn fee + 0.3% annual fee). There's no exit charge for Nest, which is good. My other idea is to leave my Nest one where it is & stop contributing to it & to start a new Vanguard one, because the Nest 0.3% annual fee is lower than the total Vanguard one - but I might be getting this bit wrong.

The Vanguard one might simply be much better & I'm being dense for not seeing this (I don't see the Nest one being compared to others very often online). I'm just posting up to check for opinions or if there're any other considerations or downsides I'm missing?

Thanks in advance for any replies!

:^)

Seldonista

I think NEST charge 1.8% of contributions on the way in and then the AMC is 0.3%, and slightly lower transactions costs too at 0.05% for their 2050 fund. The funds are more diversified and include property, some hedged global equity, and private credit, no home bias [insert debate here], but also commodities [insert another debate here] and some active management [... ask monevator about this debate]. The big but is their 2050 fund is 33% bonds whereas VTR 2050 is only 20%, and even the "higher growth" fund is only 85% equity... On balance I'd transfer and either stick with VTR 2050 for the additional growth potential from the extra equity allocation, or do a Kroijer and buy the FTSE Global All Cap until you have 10 years to go and maybe then switch into a VTR or VLS fund.

bowlhead99

potatobrains said:

 My (probably dodgy) calculations say the overall Vanguard fees are cheaper (0.15% platform + fund 0.24% + txn fee ~0.07% = 0.46%), than the overall Nest ones (1.8% txn fee + 0.3% annual fee). There's no exit charge for Nest, which is good. My other idea is to leave my Nest one where it is & stop contributing to it & to start a new Vanguard one, because the Nest 0.3% annual fee is lower than the total Vanguard one - but I might be getting this bit wrong.

If you put £1000 in Nest, the initial 1.8% charge would reduce it to £982, and then if it got you a 7% annual return net of other charges for twenty years you would end up with £3800. If you invested the full £1000 and didn't have to pay an initial transaction charge, you would only need to make a 6.9% annual return after charges to get to £3800 after twenty years. So someone outside of Nest and not paying the 1.8% charge could afford 0.1% extra annual fees, and if their platform fee and fund OCF together are about 0.4% instead of 0.3% they will still be fine.

But in your case, you're not talking about investing some new money in nest and needing to pay that 1.8% initial transaction fee - you've already paid it, it's a 'sunk cost', whether you stay with Nest or go elsewhere.  So you're right that the real calculation is 0.3% ongoing at Nest versus [more than 0.3% for platform fee and ongoing charge figure] with other pension options.  Fees aren't everything of course, and looking at charges alone is not the full picture; it's only the full picture if the investment is in the exact same stuff with the exact same return, pre-charges.

With nest the better long term choices are going to be the higher risk fund (reference allocation is 70% equity, 15% higher risk bonds, 15% property, though there will be some float around this) or the Sharia fund (100% equity so more volatile). Vanguard have a few options you might find suitable, either from their Target Retirement funds range which has a glidepath to reduce equities as you get nearer retirement (like the Nest retirement date funds) or their Lifestrategy funds which are a fixed ratio equities/bonds mix.

Overall, both providers could give you a fund that does the job you want, and whether the fee is 0.3% or 0.4% will not be a gamechanger, given the gross return of the two funds will always differ by more than that up and down each year - you won't really see whether it is hurting or not. To get the money into Vanguard you will be in cash and out of the market for a short while, which could easily help or hinder you by a couple of percent depending on how markets move, wiping out a lifetime of fee differential anyway.

As you already have an account and a login for Vanguard's platform it might be convenient to have it all in one place and then you can just forget about the paperwork you have from Nest, rather than needing to record a password and tell them when you move house etc etc.

triplea35

Nest do not make the 1.8% contribution charge on transfers in. So if you were to build a second pot with Vanguard and later decided to transfer to Nest you can disregard that charge.

Albermarle

Or alternatively - even if you have two similar looking funds , underneath the bonnet they are not quite the same . So you can hedge your bets and keep both in case they perform a bit differently.

potatobrains

Thanks for all the replies. All good points for me to consider! I'll likely transfer it to Vanguard for simplicity & it might get me eventually near to the £250k reduced fees point. I had thought about using the All Cap instead for a while (that's my main s&s isa fund) before changing it into the 2050 fund as suggested above, possibly a good idea as it might grow more, thanks.

Thanks.

Seldonista

potatobrains said:

Thanks for all the replies. All good points for me to consider! I'll likely transfer it to Vanguard for simplicity & it might get me eventually near to the £250k reduced fees point. I had thought about using the All Cap instead for a while (that's my main s&s isa fund) before changing it into the 2050 fund as suggested above, possibly a good idea as it might grow more, thanks.

Thanks.

Or VLS 100 if you're a home biaser, but there's even less to pick between that and the all cap as there is to pick between that and VTR 2050 and NEST TR 2050 🤷‍♂️